Tax Consultants: How Can They Help Small Businesses?

March 8, 2021
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Every small business has to deal with taxes, but not every company and business owner handles them equally well. 

Many business owners barely get by, turning in tax returns at the last minute and praying to avoid an audit. And that’s understandable! Tax law is almost endlessly complex, and specific requirements change all the time. 

That’s where tax consultants come in. Professional tax consultants use their expertise in tax law to work with businesses and help them succeed. 

What is a Tax Consultant?

A tax consultant is a professional accountant that can help small businesses grow with comprehensive tax advice and planning.

Tax consultants must know how the tax system works to guide companies through the tax implications of various business decisions. 

Some companies hire a self-employed tax consultant as a contractor. In contrast, some business owners may choose to work with a consulting company to provide a tax consultant according to the stated business needs. 

What Does a Tax Consultant Do?

Tax consultants do everything they can to work with an individual or business to save money and carefully consider tax-related business decisions and planning.

Here are a few of the many accounting services a tax consultant might provide

  • Complete an annual tax return and other related documentation
  • Help a client find every possible tax deduction and credit 
  • Assess business return and files for possible audit risk 
  • Guide clients through complex tax issues like trusts and rental income 
  • Work with businesses to improve recordkeeping and prepare better for future tax years
  • Walk individuals through tax implications of various life events and business issues 

Tax Consultant vs. Tax Preparer

If you’ve ever gone to a professional to prepare and file your tax return before, then you’ve most likely worked with a tax preparer. A tax preparer uses the information you provide to fill out your tax return and claim eligible tax deductions and other benefits. 

Many tax consultants are also qualified to prepare and file your tax return, but tax preparation is just one of the many tax consultants’ services. 

While tax preparers are about quickly and efficiently finishing your paperwork, tax consultants work to help you plan for and save on your taxes now and in the future. While you might reach out to a tax preparer when it’s time to file during tax season, it’s the tax consultant you should be in contact with all year long. 

Do Tax Consultants Need a Certification?

A tax consultant does not need a specific license or certification to be a tax consultant, so qualifications may vary. However, most knowledgeable tax consultants will have some kind of certification. 

To prepare and submit a tax return on your behalf, a tax consultant or tax preparer must register with the IRS as a tax return preparer. They must have an IRS Preparer Tax Identification Number to perform that duty. 

Tax consultants must also have some other eligible kind of qualifying certification to represent you for all possible tax issues before the IRS. Three primary categories of certification work for this purpose: 

  • Enrolled agents with the IRS
  • Certified public accountants
  • Licensed attorneys

Enrolled Agents

Enrolled agents are certified by the IRS as qualified and credentialed tax professionals. They must pass an IRS exam proving their understanding of federal tax law for individuals and businesses. 

The IRS requires that enrolled agents keep to strict ethical standards and seek continuing education to stay informed and up-to-date on changing tax laws. 

Certified Public Accountants

A certified public accountant must also meet rigorous testing and educational requirements credentialed by the American Institute of Certified Public Accountants. That testing requires knowledge of the fundamentals of federal and state tax laws. 

Not all CPAs are necessarily qualified as tax consultants, however. CPAs specializing in tax advice may be among the most qualified consultants available, but many CPAs focus on accounting work in other business and finance areas. 

Licensed Attorneys

Educated and accredited attorneys licensed by their state bar are also legally qualified to represent any taxpayer before the IRS for nearly any tax purpose. 

Like accountants, however, most attorneys tend to specialize in one or more specific areas of law. An attorney specializing in tax law might be an excellent candidate for a tax consultant. Still, an attorney focusing on criminal or immigration law might be of little to no help for your purposes. 

How to Choose a Tax Consultant

There is a lot to consider when picking a tax consultant. You should carefully consider the different qualifications and certifications available and be sure that your tax consultant is suitably knowledgeable about the issues facing your business. No matter their specific qualifications, you need to know that they have experience and knowledge relevant to your particular field and needs. 

Professional qualifications and knowledge aren’t enough to make someone a good fit for your company, however. You need to be able to trust that your consultant has your best interests in mind. While any qualified tax preparer may competently file your return, a tax consultant is meant to be a trusted partner for your business. 

Meet with multiple candidates before settling on a specific tax consultant. You want to be sure that you can communicate well and that the consultant understands your business and its mission. They should be cautious and responsive to your needs and concerns. 

If you work with a tax consulting company, you may be able to meet multiple accountants before picking someone specifically to work with.  

How Much Does a Tax Consultant Cost?

A tax consultant’s fees will vary widely depending on the kind of service you ask for and the consultant’s specific qualifications. 

Before selecting someone to work with, you should ask for precise information about their price schedule for different services. Compare prices between specific individuals and agencies before you make a decision. 

Total tax return preparation costs can range between $100 and $500 for preparing and submitting the full tax return. More extensive tax consultation services throughout the year often charge by the hour.

It’s essential to explore your options and consider what you want and what is a worthwhile expense.

Don’t be discouraged by the potential cost of hiring a tax consultant. Tax advising services are not just for big corporations and the wealthy. Every business and individual may be able to benefit from professional help. 

A little bit of work with a tax consultant can go a long way. You’re investing in efficiency and savings in the long-term. Figure out ahead of time how you can keep your tax burden down and keep your finances healthy.  

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.